[darkphantom]

Employer’s contributions to employee’s medical insurance plans are not currently subject to income taxation by the federal government. At intervals Congress considers taxing these benefits as personal income. It is not impossible that at some point Congress will choose to plug this “loophole”.

1. Taxing the current level of employer contributions would raise about $100 billion/yr in revenue.

2. About 5% of the burden of such taxation would fall on the poorest 1/3rd of households.

3. Medical expenditures of all types in the US have gone from 5% of GNP in 1960 to over 15% now.

What are the arguments for and against this tax law change?

Ok, so first I'm trying to understand this question. It says that currently, the government does not tax the amount employer's set aside to pay for medical expenses for their employees, right?
Then it says, these amounts are taxed at times by congress as personal income - I don't get that, because since this is for medical purposes, why would it be taxed as personal income?

1) states that it would increase gov't revenue by $100billion/yr but it doesn't state if it will be allocated towards medical expenditures.

2) states that 33% of the poorest homes will be burdened - why not leave it the way it is?

3) I'm sure inflation is taken into account, but it may also be that more and more people are getting sick?

Just need your input on this....was working on a paper, thought some of you could chime in w/ the whole medical insurance thing. Not too familiar with it

[darkphantom]

bump, anyone understand the question?

[ganeil]

Originally Posted by darkphantom

Ok, so first I'm trying to understand this question. It says that currently, the government does not tax the amount employer's set aside to pay for medical expenses for their employees, right?
Then it says, these amounts are taxed at times by congress as personal income - I don't get that, because since this is for medical purposes, why would it be taxed as personal income?

Congress has considered taxing employer provided health care premiums as income but they have not done it yet.

1) states that it would increase gov't revenue by $100billion/yr but it doesn't state if it will be allocated towards medical expenditures.

If it is taxed as ordinary income, the revenue would go into the general fund and be used for whatever the Congress decided on a year by year basis.

2) states that 33% of the poorest homes will be burdened - why not leave it the way it is?

One of the problems with the system the way it is now is that employers who provide health benefits get to do so with pre-tax dollars but individuals who have to pay for their own health insurance have to pay for it with after-tax income. This contributes to people becoming dependent on their employer for this coverage. One of the better aspects of McCain's plan is that it taxes benefits but then provides a tax credit to individuals to mostly offset the tax. It would not generate revenue but would put decisions regarding coverage plans into the hands of individuals rather than employers.

3) I'm sure inflation is taken into account, but it may also be that more and more people are getting sick?

Just need your input on this....was working on a paper, thought some of you could chime in w/ the whole medical insurance thing. Not too familiar with it

Since the figures relate the cost to GDP, inflation is not much of a factor. The fact that we are living longer, relying on medications, and benefit from incredible leaps in medical technology along with the market distortion that occurs when third parties pay for services all contribute to the growing cost of medicine.

[K330i]

Originally Posted by darkphantom

Ok, so first I'm trying to understand this question. It says that currently, the government does not tax the amount employer's set aside to pay for medical expenses for their employees, right?
Then it says, these amounts are taxed at times by congress as personal income - I don't get that, because since this is for medical purposes, why would it be taxed as personal income?

1) states that it would increase gov't revenue by $100billion/yr but it doesn't state if it will be allocated towards medical expenditures.

of course not......it will go to all the recent bail outs you've been seeing on the news. money doesn't grow on trees you know!!!

[ideliver]

It is fairly simple...I will use real world examples in this hypothetical...

I am a small business employer...for the purpose of discussion...forget about me the business owner or "highly compensated employee"...but think of my hourly workers...also forget the tax implications to the corporation....your question was about the workers...

Currently...the employee gets paid every two weeks with a gross pay of $1500....$150 goes to 401(k)...leaving $1350 of taxable income...from this federal, state, city, medicare tax and social security tax being withheld. The emloyer matches the medicare and social security tax.

But...the employer also spends $900/mo for health insurance for her and her 2 children...

So...this employee "costs" the company $3000/mo in wages, plus 401(k) matching) and $900/mo in health insurance...

BUT...the employee doesn't have to treat that $900/mo ($10,800/yr) as income....it shows up nowhere on the employees taxable wages...IT IS FREE...

But, in reality...it is something of value and is income...and could be taxed as such...

now...McCain is planning on taxing this as income...deregulating the health insurance market (think Geico and progressive) and letting the worker decide what to do with that 11 k/yr....

And get tax credits to offset the insurance cost...and end the dependance on the employer for insurance with the legacy costs that are killing many of our companies...

GM spends more per car health insurance than they do on steel...and their #1 single heathcare item...are proton pump inhibitors...prilosec/prevacid...TO TREAT HEARTBURN...when eating better...or just taking some rolaids would work as well...but yet they get these $100/mo drugs for only $3 so they all take them....but this is

[darkphantom]

thanks alot guys! I got lots of stuff and this is great, really diversifies my view of things...

thanks for the mccain updates... hehe...old bastard! j/k

[magmd]

well bottom line is that yes...I get several $K in benefits that are non-taxed. But this income is far from being FREE.

I agree to my contract for $K less income (Gross Income) BECAUSE they offer full benefits---an amount that is less than what I could obtain in the private sector. I am working for less because I do get these benefits and I like what I do.

If they are going to count my benefits as income, and start taxing me. Then I am going to renegotiate my contract to have an increase in my Gross Income (that $k amount I used to get "free"). BECAUSE now they are not providing me any perks AND they are paying me less than what I could get elsewhere.

I was willing to work for less income in order to get these benefits. Luckily I work in a profession that I am a not easily replaceable. Not everyone will be able to adjust their Gross Income to account for these changes if they were to go through.

[ideliver]

Originally Posted by magmd

Not everyone will be able to adjust their Gross Income to account for these changes if they were to go through.

hence the "tax credit"

[ganeil]

Originally Posted by magmd

well bottom line is that yes...I get several $K in benefits that are non-taxed. But this income is far from being FREE.

I agree to my contract for $K less income (Gross Income) BECAUSE they offer full benefits---an amount that is less than what I could obtain in the private sector. I am working for less because I do get these benefits and I like what I do.

If they are going to count my benefits as income, and start taxing me. Then I am going to renegotiate my contract to have an increase in my Gross Income (that $k amount I used to get "free"). BECAUSE now they are not providing me any perks AND they are paying me less than what I could get elsewhere.

I was willing to work for less income in order to get these benefits. Luckily I work in a profession that I am a not easily replaceable. Not everyone will be able to adjust their Gross Income to account for these changes if they were to go through.

Your employer's costs do not decrease if the fed's tax your benefits. The cost of your employment remains the same and they may not be able/willing to renegotiate with you. Would you feel entitled to change the terms of your employment if/when (if Obama is elected) the marginal rate is raised on your income tax bracket?

[ideliver]

Originally Posted by ganeil

Would you feel entitled to change the terms of your employment if/when (if Obama is elected) the marginal rate is raised on your income tax bracket?

And...I sure hope that you do not make more than $250 k...because you will loose another 7% when they impose social security taxes on your wages earned over $250 k...........because it's the patriotic thing to do...

[darkphantom]

Originally Posted by ideliver

And...I sure hope that you do not make more than $250 k...because you will loose another 7% when they impose social security taxes on your wages earned over $250 k...........because it's the patriotic thing to do...

unless you're in the fortune 500 or somewhat similar, most people don't show their real income on tax returns

[magmd]

Originally Posted by ganeil

Your employer's costs do not decrease if the fed's tax your benefits. The cost of your employment remains the same and they may not be able/willing to renegotiate with you. Would you feel entitled to change the terms of your employment if/when (if Obama is elected) the marginal rate is raised on your income tax bracket?

Yes, I understand. Their cost is remains the same. And currently they are able to pay me my current rate b/c I get benefits. If get taxed, then I will need to have them readjust their compensation for the rest of the market. Like I said, luckily...I am fairly sure that they would agree in order to keep me. Not everyone else would.

Obama...well, I am in an income bracket that gets screwed with either party. I do not make enough to truly benefit from Republican ideals and I am not self-employed. And I make too much to benefit from Democratic ideals.

Its all about damage control for me. I try to find ways to move/invest my income. But, at least I have something to take care of. Others do not have anything.